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Key highlights
- - The general anti-avoidance rule for income tax to be expanded for schemes that access a lower withholding tax rate and schemes that achieve an Australian income tax benefit where a foreign tax benefit was the dominant purpose.
- - There is an increase in ATO and Treasury funding to target debt and compliance.
- - Increase in the tax on tobacco by five per cent per year for the next three years (above standard indexation increases).
- - Deferring start date of excise streamlining measures to 1 July 2024.
- - Decrease in Fuel Tax Credit for on-road Heavy Vehicles .
Expansion of the general anti-avoidance rule in the income tax law
The general anti-avoidance rule for income tax contained in Part IVA of the Income Tax Assessment Act 1936 will be expanded so that it can apply to:
- schemes that reduce tax paid in Australia by accessing a lower withholding tax rate on income paid to foreign residents, and
- schemes that achieve an Australian income tax benefit, even where the dominant purpose was to reduce foreign income tax.
The expanded rule will apply to income years commencing on or after 1 July 2024, regardless of whether the scheme was entered into before that date.
Increase in funding to ATO and Treasury
The Government will provide:
- $588.8 million to the ATO over four years from 1 July 2023 to continue the GST compliance program and develop more sophisticated analytical tools to target risks to the GST system
- $89.6 million to the ATO and $1.2 million to Treasury to extend the Personal Income Tax Compliance Program for two years from 1 July 2025 and expand its scope from 1 July 2023
- $82.1 million to the ATO over four years to facilitate engagement with taxpayers who have high-value debts over $100,000 and aged debts older than two years where those taxpayers are either public and multinational groups with an aggregated turnover of greater than $10 million, or privately owned groups or individuals controlling over $5 million of net wealth, and
- $1.9 million over two years from 2023-24 to establish a public registry of beneficial ownership of companies and other legal vehicles, including trusts.
Producer and location offsets
The Government has announced it will increase the Location Offset rebate rate to 30 per cent from 2024-25, whilst increasing the minimum Qualifying Australian Production Expenditure thresholds to $20.0 million for feature films and $1.5 million per hour for television series, in order to attract investment from large-budget screen productions and provide domestic employment and training opportunities.
The Government will also provide funding from 2024-25 for the Australia-India Audio-Visual Co-Production Agreement to enable eligible producers to access the Producer Offset, a refundable tax offset for approved Australian expenditure.
Ban on vapes and tax increase on tobacco
The Government has announced a number of measures relating to tobacco and vaping products, proposing stronger regulation and enforcement of all e-cigarettes, including new controls on their importation.
The Government will also increase the tax on tobacco by five per cent per year for three years in addition to normal indexation increases from 1 September 2023. In addition, the Government will progressively align the tax treatment of loose-leaf tobacco products (such as roll-your-own tobacco) with the manufactured stick excise rate between 1 September 2023 and 1 September 2026 to ensure these products are taxed equally.
Deferral of excise streamlining measures
The Government is deferring the start date for some components of the 2022–23 March Budget measures in relation to the streamlining of excise administration for fuel and alcohol from 1 July 2023 to 1 July 2024. This applies to measures that:
- remove overlapping between Australian Border Force and ATO systems (i.e. creating a Uniform Business Experience)
- streamline license application and renewal requirements
- remove regulatory barriers for excise and excise equivalent customs goods (including lubricants, bunker fuels for commercial shipping industries, and vapour recovery units), and
- creating a public register of excise and excise-equivalent custom goods licences administered by the ATO.
Fuel Tax Changes
Fuel tax related measures in the 2023-24 Budget include:
- increasing the Heavy Vehicle Road User Charge rate from 27.2 cents per litre of diesel by six per cent per year over three years from 2023–24 to 32.4 cents per litre in 2025–26. The changes will result in a decrease to the fuel tax credit entitlement for fuel used in Heavy Vehicles travelling on-road (for example, in year one, the fuel tax credit will decrease from 20.5 cents per litre to 18.8 cents per litre)
- Increasing the excise and customs duties relating to the Product Stewardship for Oil (PSO) scheme including increasing the PSO levy by 5.7 cents from 1 July 2023. The PSO levy will increase from 8.5 cents to 14.2 cents per litre for specific oils and greases.
Increase in low value cargo charges to fund biosecurity facilitation measures
The Government will provide an additional $1.0 billion over four years from 2023–24 (and $268.1 million per year ongoing) to increase capability in Australia’s biosecurity system and maintain existing services. This will result in increases to cost recovery charges for imported goods, which will increase overall costs associated with importing goods for Australian importers. Specifically, charges for imports of low value cargo will be increased, affecting overall costs for Australian importers of low value cargo.
Key measures to be funded include $145.2 million over three years from 2023–24 to deliver new digital systems to facilitate and streamline the import of goods through integration with business systems.
Simplified Trade System
The Government will provide an additional $23.8 million in 2023–24 to continue initiatives to modernise and improve Australia’s international trade system, including delivering the simplified trade system reforms and continuation of the Trade Information Service.
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Contact us
Jonathan Woodger
Partner, Tax Controversy and Dispute Resolution, PwC Australia
Tel: +61 423 029 454
